Thursday, May 31, 2007

Here's a great way to get a bonus for something your child is already doing this summer. Barnes & Noble is doing a promotion from May 29, 2007 to September 2, 2007 called Summer Reading in the Magic Tree House. Eligible participants are children in grades 1-6. Each child who reads any eight books and has it validated by their parents can receive a free paperback from Barnes & Noble. Pick up the form at Barnes & Noble or at their website. Limit two free books from a select list of paperbacks.

For more on Crossing Generations , check back every Thursday for a new segment.

Wednesday, May 30, 2007

For people that think higher incomes with help them save, think again. This Marketwatch article The Rich Don't Save Either describes how a HSBC survey showed that people who make $250,000 a year were not saving. Here's a quote of some of the interesting facts:

"HSBC found that 49% of respondents with at least $250,000 in income aren't saving more because they simply 'want some spending money.' In 28% of the cases for those who earn between $100,000 and $250,000, respondents say they do not save more because 'something unforeseen always comes up.' And in nearly one in 10 situations, people who earn $250,000 or more say they aren't even earning "enough to make ends meet as it is."

Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills, with 34% of respondents of those who earn more than $250,000 concurring. "

Saving is about discipline and making choices. Saving doesn't just happen when income grows. As I have written before, saving is the starting point to building wealth. So it is important to save, no matter what one's income is.

For more on The Practice of Personal Finance , check back every Wednesday for a new segment.

Tuesday, May 29, 2007

Although I am not a fan of country music, I am a big fan of country music titles. They have a way of stating the obvious in a novel poignant manner. Here are country and western song titles that could also be reapplied to personal finance challenges.

A classic explanation for financial issues is that it is the other person's fault. The spouse or kids has bad spending, borrowing or saving habits. There's nothing the person sharing the story can do about it.

However, managing wealth is a family responsibility and it's all for one and one for all. The reason for my financial situation is in the mirror every morning:-)

This one has double meaning - some get all the good luck and some seem to get all the bad luck. Does it ever seem some people always have great stock picks, have great jobs and even buy winning lottery tickets? On the other hand, some people are always spending more than they make, want different jobs, or gamble too much.

However, as my football coach once said, we make our own luck. What often looks like a break is the result of good planning and hard work. In this case, what's true in sports is also true for personal finance. The good breaks come to those that have good goals, good plans and can execute well.

To build wealth for the future means giving up something in the present. That may mean spending less, working long hours for more compensation, continuing night education for a higher paying job or working multiple jobs. Often, the the choice is between a great present or a great future.

Delaying gratification for future benefits is an important element of wealth building for most (but not necessarily all) people. Many people believe they can have both, assuming that future income growth will make up the difference. However, often people who make more actually have more difficulty saving since they haven't developed the habit when they made less.

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Monday, May 28, 2007

I base my stock picking system on the Unemotional Investor Growth system from the book The Unemotional Investor by Robert Sheard, with the following modifications. First, I look at the top 20 stocks. In addition, I have found that avoiding the stocks that have a high percentage of shorted shares and investing when the Value Line weekly Rank 1 turnover is low are good additions to his Unemotional Growth criteria.

Interestingly, the last two weeks have had a high turnover of Rank 1 stocks. However, many of the stocks being added are showing up in the top 20 of the list. While I have not seen this phenomenon before, my experience tells me this is a positive sign for the market. In an earlier post, I shared the four buy recommendations from the system. Here are the four stocks that almost made the buy criteria, just barely missing by a narrow margin.

While all four picks are good stocks, I think Apple and Coach may be at risk should consumers reduce their spending, due to the higher cost of gas. Core Labs is related to energy, which no longer a fast rising sector. Manitowoc stands to benefit from infrastructure improvements, which I think will be a strong driver in the near future. Here is a brief description for each company, referenced from the Yahoo! Finance profiles.

Apple (AAPL) product lines include the MacIntosh computers, the iPod, the iTunes store, and the upcoming iPhone. This stocks has had a terrific run up since the return of Steven Jobs, who is the creative force behind the company.

Coach, Inc. (COH) engages in the design and marketing of handbags and accessories in North America and internationally.

Core Laboratories N.V. (CLB) provides reservoir description, production enhancement, and management services to the oil and gas industry worldwide. It engages in determining quality and measuring quantity of the fluids, such as natural gas, crude oil, and water and their derived products in the oil and gas fields.

The Manitowoc Company, Inc. (MTW) engages in the manufacture and marketing of cranes and related products, foodservice equipment, and marine products in the United States and internationally. It operates through three segments: Cranes and Related Products (Cranes), Foodservice Equipment (Foodservice), and Marine.

I have owned and sold Apple (AAPL) and Coach (COH) from previous buy and sell signals. Since Both of these stocks are dependent on the US consumer, I am cautious about purchasing these stocks again. At this point, I plan to consider these stocks after making purchases of the four "buy stocks" identified earlier today.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or parenting advice. Please consult a professional advisor.

I base my stock picking system on the Unemotional Investor Growth system from the book The Unemotional Investor by Robert Sheard, with the following modifications. First, I look at the top 20 stocks. In addition, I have found that avoiding the stocks that have a high percentage of shorted shares and investing when the Value Line weekly Rank 1 turnover is low are good additions to his Unemotional Growth criteria.

Interestingly, the last two weeks have had a high turnover of Rank 1 stocks. However, many of the stocks being added are showing up in the top 20 of the list. While I have not seen this phenomenon before, my experience tells me this is a positive sign for the market. Here are the four buys identified by the system.

All four picks are in industries that I believe will benefit from the strong economy and business investments - infrastructure, materials, communications, and computers. Here is a brief description for each company, quoted from the Yahoo! Finance profiles.

Potash Corporation of Saskatchewan, Inc. (POT) engages in the production and sale of fertilizers, and related industrial and feed products. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes.

I currently own Avnet (AVT) from my Q1 2007 Stock Pick List. I will be looking to buy the other three during this week.

Finally, the system also identified four stocks that "almost" met the buy criteria. They were close enough that I may consider selective purchases among those stock. A post on those stocks will be available later today.

For more on Strategies and Plans, check back every Monday for a new segment.

Sunday, May 27, 2007

"The only thing that stands between a man and what he wants from life is often merely the will to try it and the faith to believe that it is possible." - Richard M. Devos

Last month I read, but can no longer find the link, about T. Boone Pickens saying that he never worried about losing it all, because he knew he would make it all back again in a subsequent venture. The article noted that this was a common attitude of entrepreneurs.

Separately, I confirmed this confidence with one of my college roommates who is an entrepreneur. While there are many peaks and troughs in the business, he is very confident that the peaks will come.

I admire that confidence of entrepreneurs. It's a level of confidence that I have yet to achieve. For me, I am never "sure" that I have win. I tend to think, "This could be a win," and I am never sure when it will happen. A mindset change for me is to build the entrepreneurial confidence and know that I can hit it big, more than once:-)

For more on New Beginnings , check back every Sunday for a new segment.

Saturday, May 26, 2007

In an earlier post, I wrote the estimated value of My Wealth Builder was about $350,000. Since then, I have found a couple of blog value estimators that seem closer to reality. The first is dnScoop, which estimates the value of My Wealth Builder at $2000. The second is the Blog Valuation Calculator at A Virtual Exit, which estimates a value of $1700.

dnScoop uses an algorithm based on the following variables: blog age, Google Page Rank, inbound links, Alexa traffic rank, and number of indexed pages. The Blog Valuation Calculator at A Virtual Exit uses monthly traffic, Google Page Rank, eCPM, and estimated expenses for its algorithm.

While I agree that $350,000 is unrealistic, $2000 seems a bit low. Sentimentally, I consider my collection of posts to be priceless. Emotionally, I would have a very hard time letting go for under seven figures:-) However, the reality is price is really determined when a transaction is completed, and I am not currently interested in selling.

For more on Reflections and Musings, check back every Saturday for a new segment.

Friday, May 25, 2007

“The trouble with the rat race is that even if you win, you’re still a rat.” - Lily Tomlin

I have started reading Die Broke by Stephan Pollan. The first recommended strategy is Quit Today. Mr. Pollan doesn't mean quitting one's job. He means quit chasing the unattainable goal of a career that is rewarding emotionally and financially and one that fulfills a personal life mission. A job, he points out, should be put into the context of one's overall life and a job's primarily purpose is to produce income so that one can achieve one's life goals. Finally, one should do excellent work in one's job, and also have a life.

Overall, I agree with the strategy. When he wrote the book in the 90s, "quit today" was great advice. Many people were following the approach of making a career one's life work. However, being inextricably linked with one's job can be devastating, either when the job is eliminated or when one is no longer getting promoted.

However, in my personal experience, I have done best financially when I was very focused on my career. During those times, I took on the toughest assignments, worked long hours and weekends, and delivered great business results. I was rewarded with higher compensation and promotions. It was during this time in my career that our wealth increased the fastest.

Thus, to me "quit today" doesn't mean "never do it." I interpret "quit today" to mean "know when to stop." My build on this strategy is to be ruthlessly opportunistic at the appropriate points in one's career. During these times, work life balance is skewed heavily toward work and one can significantly build wealth. However, one should also realize that the "extreme" focus on work may not be sustainable. Eventually most of us need to be able to "quit today" and go back to a more sustainable work life balance.

For more on Reaping the Rewards, check back every Friday for a new segment.

Thursday, May 24, 2007

I am happy that we had children later in life. I believe that I will be better parent than I would have been in my 20s. However, there are also many pros to having kids when one is young. Based on my own experience, here are some advantages of being a younger or older parent.

Younger

Better physical condition. Young kids require carrying, chasing, and lifting. These are just a few of the exercises of a parent. It's easier to keep up when one is younger.

Multitasking. Keeping track of a young child can be mentally challenging. When I was younger, it seemed I could do many more things at the same time.

Social network. Parents of your child's friends and classmates are about the same age. So it's easier to find parents with common interests and experiences.

Older

More financially secure. In my twenties, I had a student loan, a car loan and had purchased my first house. Although I was saving money, it always seemed that any extra expense was challenging. As an older parent, it seems less of a financial hardship to have a child.

More easy going. I worry less about things getting broken, items on the floor, book pages getting torn or things getting lost. Stuff happens :-) I also realize my daughter is her own person, with her own interests, and that she could (will likely:-) be very different than me.

Greater interest in our child. In my twenties, I was very focused on me - my job, my activities, and my friends. As an older parent, I have tremendous interest in and fun with what my daughter likes to do.

While this doesn't cover all the differences, it highlights what I consider the major advantage differences. It's too bad that we couldn't have the best of both ages at the same time:-)

For more on Crossing Generations , check back every Thursday for a new segment.

Tuesday, May 22, 2007

TD Ameritrade is once again offering a free IPod Nano for new accounts which deposit $10,000 or more. As I wrote in a previous post, I will only open such an account when I need one (and not just to get the promotion). We opened a UTMA account for our daughter in February, 2007 and received the IPod in April, 2007.

I have been a customer of TD Waterhouse, one of the companies in the merger, and have been satisfied with their service. They are a $9.99 per trade discount broker, and they offer a wide range of services.

Hosting a Carnival involves creativity and effort. The hosts do an excellent job of reading and arranging a number of posts to make the Carnival interesting. I appreciate the work that they do. For me, I like to read the Personal Finance, Personal Development, Investing and Family related carnivals. Here are some of the Carnival hosts from yesterday:

Monday, May 21, 2007

Since my entire retirement income will initially be derived from my retirement savings, I have been learning more about how to manage investment risk. I was already aware portfolio risk management for stocks and asset allocation. My financial advisor shared another approach which is summarized in the Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors by Ashvin B. Chhabra in THE JOURNAL OF WEALTH MANAGEMENT, vol. 7, no. 4, Spring 2005, which discusses the use of Risk Allocation as a strategy to manage wealth. (The full article can be downloaded at the link.) A major conclusion of this article is that, for the individual investor, risk allocation should precede asset allocation.

While the author agrees with Modern Portfolio Theory (MPT) on equity allocation, he proposes that MPT is necessary but not sufficient part of Wealth Allocation. Wealth allocation should also include a low risk/low return bucket (e.g. home, cash) and a high risk/high return bucket (e.g. investment real estate.) A diversified stock portfolio would only be part of the mid risk/mid return bucket.

Here's how Chhabra allocates a wealth portfolio by risk buckets:

Allocation By Risk Bucket

Personal Risk

Market Risk

Aspirational Risk

Purpose

Maintain basic standard of living

Maintain lifestyle

Enhance lifestyle

Asset Allocation

Cash

Home

Home Mortgage

CDs and Bonds

Insurance

Human Capital (Income from job)

Equities

Fixed income

Cash - For opportunistic investments

Alternative investments - hedge funds

Investment real estate

Small business

Concentrated stock position or stock options

Recommended Percentage

40%

50%

10%

My Percentage

36%

11%

53%

This article and analysis was eye opening for me. My percentages are skewed towards the aspirational risk, primarily due to my retirement account being invested in company stock. (For reference, company stock is the only option available for my employer contributions.) This analysis also helps me understand why I have been more comfortable with low risk investments in my personal accounts - i.e. because I am currently over invested in the aspirational risk category. So the 47% percent of investments that I directly control are split 77% cash equivalents and home, and 23% in the stock market.

Also, as I think about a retirement investment strategy, I will need to consciously decrease my concentration in company stock and increase my exposure to the overall stock market.

For more on Strategies and Plans Ideas , check back every Monday for a new segment.

Sunday, May 20, 2007

I have periodically considered what it would take to have my own business. I recently came across Mastering the New Entrepreneurship by Penelope Trunk, which presents some provocative thoughts on starting one's own business. She writes: "Here’s a list of the old and new ways of thinking when it comes to starting your own business:

Old: Do a lot of planning and make sure it’s going to work before you start.
New: Forget the big plan. Just try it. If it doesn’t work, you can just try again."

This article, as would be expected, created lots of comments both for and against her points. Many experienced entrepreneurs commented that the new ways didn't reflect reality based on their experience with start ups.

Not being an entrepreneur, it is very difficult for me to give other than speculative comments. My belief is that there is an AND. Being an entrepreneur is still hard work, AND the new world is highly enabling some areas - e.g. lower cost of entry due to the Internet.

For example, I would not be writing this blog if I needed to build the infrastructure and do programing. However, with an infrastructure developed (and free to use), I can focus on the important part of blogging, the content. On the other hand, there is significant competition. According to Business Week there are 15.3 million blogs that are current, i.e. updated in the last 90 days.

Net, the new entrepreneurship may be lower risk due to lower costs of entry, but the competition is also greater, due to lower costs of entry.

For more on New Beginnings, check back every Sunday for a new segment.

Saturday, May 19, 2007

Last year's performance does not necessary guarantee next year's performance. That's true for investments, sports, and life in general. I have played sports virtually all my life. I've played on championship teams and last place teams. The one constant is that each season is a new opportunity, because the score starts at 0 wins and 0 losses.

Here are some thoughts on how this concept applies to career, wealth building and personal finance:

Never rest on one's laurels. I love relishing success as much as the next person. It's great when the strategy, implementation or analysis is successful. However, I realize it not what one has done, but what one will potentially do that defines one's value to the company. Keep going after the next success.

Last years great results does not guarantee great results this year. What worked last year may not work this year. Competitors are always trying to beat the market leader. The market and environment are always changing. Recognize what's need to keep one's company in the lead.

Often sustained performance predicts future performance. Because it is hard to be successful, consistent success often is an indicator of future success. Examples are John Wooden for UCLA basketball, Tiger Woods in golf, George Soros in hedge funds, and Warren Buffet for stock investing.

However, one must also consider recent performance along with long term performance. Great examples of the issue are Wal-Mart and Dell. Throughout the nineties, Wal-Mart and Dell were the category killers. However, in recent years, their previously successful business models are now faltering.

To get better results often requires changes to be made. Better results often require something changing, whether that be doing something different or the marketplace changing. When one is losing or falling behind, change is needed. If one is winning and wants to keep winning, improvements are needed.

Net, each new day, week, month or year is a new opportunity, to make into a success or let become a failure. Carpe diem!

For more on Reflections and Musings , check back every Saturday for a new segment.

Friday, May 18, 2007

Die Broke, written over ten years ago by Stephen Pollan, has been getting some press recently at Bankrate.com and in the blogosphere.

According to the article, the book proposes four strategies:

Quit Today - Leave the corporate world to gain greater control of one's career.

Pay Cash - Free oneself from debt.

Don't Retire - Plan to remain active.

Die Broke - Safely transfer assets to heirs while still around to enjoy the giving.

Another concept is that money should be considered a tool. Once one dies, money has no use. Therefore, success should be defined by what one does with money and not how much one has (when one dies). Mr. Pollan has successfully followed his own advice for 10 years after writing his book. He is now 78 and is on track to die broke.

I have not yet read the book. However, I found the article intriguing. I already practice two of the strategies, pay cash and don't retire. I am interested in learning about the other two strategies and am getting a copy from the public library to read.

For more on Reaping the Rewards , check back every Friday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Hosting a Carnival takes quite a bit of effort and is done entirely on a voluntary basis. The hosts do an excellent job of reading and arranging 30 to 100 posts into formats that are interesting to readers. Here's some of the Carnival hosts from the past week:

Thursday, May 17, 2007

In the UTMA, we purchased a 5.1% CD due on 9/15/2008. The UTMA account is designed to fund her weekly allowances until she is 18, at an amount equal to two times her age. Thus, I want to have a "guaranteed" return on the money. Of course, the risk is that 16 months from now, I won't be able to get 5% interest any longer.

Since the 529 plan is for college tuition, we won't need any funds for 16 years. Therefore, this account is invested in the stock market. We have invested 25% in each of the following funds:

Vanguard Fund

YTD Return
as of 5/14/07

Aggressive Growth Index Portfolio

7.25%

500 Index

6.63%

Extended Market Index

8.33%

Developed Markets International Stock Index

9.21%

The S&P 500 had a 6.55% YTD return as of 5/14/07.

To date, I am pleased with the investment performance of both accounts. Currently, a 2 year treasury bill is paying 4.73% versus 5.1% that I got for the CD. In the 529 plan, all the mutual funds are matching or beating the S&P 500 returns and averaging 7.9% YTD which is exceeding the 8% annualized return that we need.

For more on Crossing Generations , check back every Thursday for a new segment.

Use debt sparingly and for items that may appreciate (e.g. home and education) and not for everyday expenses.

Go to college and major in a degree that leads to a profession.

If it sounds too good to be true, then it is.

Millions of articles have been written about the benefits of following these principles. These are are proven principles that, if followed, will lead one to be wealthy. It should be automatic.

What's Not New
If these principles are so good why doesn't everyone follow them? Primarily, because people can always rationalize why the principles are no longer true. Here are some of my thoughts on rationalizations against each of the principles and why I ignore these rationalizations.

Live for today rationale.Who knows what will happen tomorrow? It would be a shame if one gave up something and didn't benefit from it later. Also, this rationale is concerned about over saving for retirement. Part of the reason may be that 67% of workers today expect to work during retirement. This may be an unrealistic expectation since about 27% of today's retirees actually do work. Reference: Employee Benefit Institute. As a result, the future becomes second priority to the present

I do know that life expectancies are increasing. We try to live below our means today so that we will have a comfortable retirement in the future.

I have time to start later rationale. For people in their 20s, 40 years seems like a long ways away. Therefore, they feel they can wait before starting saving. Before long, 10, 20, and even 30 years have passed and they still haven't started saving.

I believe that the perception and reality are mismatched. 71% of workers are somewhat (44%) or very (27%) confident about their financial security in retirement. However, 22% of the very confident workers are not currently saving, 39% have less than $50,000 in savings , or 37% have not done a retirement needs estimate.

In fact, today retirement saving is even more self service. In 1985 to 2005, the percentage of companies with defined benefit plans has declined from 91% to 61%. That's why we started in our early twenties and now save over 20% of our salary every month.

Inflation rationale. This is the belief that money paid back tomorrow will be worth less than money spent today. Therefore, one should borrow, spend as much today, and pay it back with dollars that are worth less in the future. Way save when the money will buy less in the future? This thinking was started in the 70s and 80s, when inflation was relatively high.

I know the average bank is smarter than the average borrower. Banks are in the business making loans and earning money from the interest. In the long run, banks won't lose money due to inflation and the majority of borrowers shouldn't expect to make money long term by arbitraging interest rates and inflation. Because of this belief, the only debt we have is our mortgage.

Only do something you love rationale. This is based on the belief that one should love what they are doing for work. Or one should convert something one loves into work.

For me, the reality is I would not be paid much for what I love to do, which includes socializing with family and friends, playing sports, reading newspapers, investing in stocks, and blogging. At least, I haven't found that employer yet:-)

However, I do believe people should have a career in an area where they have an interest and a liking for the type of work. That's why I chose an Engineering degree. I liked using math and solving technical problems. Also, it helped me get a great first job, which created the foundation for my career.

The world is "different"now rationale. When a new idea exceeds people's expectation, some assume it is due to a fundamental change in the world. Recall the technology stock bubble, the commodity bubbles, and the housing bubble. In each case, there were pundits telling us the we were in a "new world" and the past principles were no longer relevant.

In my experience, most deviations in personal finance principles have been temporary. One only needs to consider stock, bond, gold or real estate investments from the past decade. For a short period (about 5 years), it appeared to be a "new world" and people threw out past principles, only to find out the principles were still valid.

Eventually, those that use one of the above rationalizations find out that the personal finance principles are still accurate.

What Is Really NewThe market is globalized . We are a global economy now, which creates more interdependency and complexity than before. People in Asia and Europe are direct competitors for my job. International currency decisions and international stock markets have more impact on my investments and financial security that before. Most important, unions, tariffs, and other non-market methods are no longer effective at protecting jobs.

Change is happening at a faster pace. New markets, new technologies, new business models and new stuff. The only constant is change and what seems like a sure thing may be tomorrow's failure. So while the approaches may be constant, how to implement the principles will continue to evolve. Not too long ago one could count on a niche business (such as a family business) lasting several decades. Now businesses need to reinvent themselves every 5 to 10 years in order to keep up with the markets.

So while the principles are timeless, the environment is changing. It is now important review progress more often and look at global impacts and other changes that could affect investment and savings approaches.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

Tuesday, May 15, 2007

I base my stock picking system on the Unemotional Investor Growth system from the book The Unemotional Investor by Robert Sheard, with the following modifications. First, I look at the top 20 stocks. In addition, I have found that avoiding the stocks that have a high percentage of shorted shares and investing when the Value Line weekly Rank 1 turnover is low are good additions to his Unemotional Growth criteria.

There have been a higher than normal weekly turnover in stocks included in the evaluation, which sometimes signals a correction in the market. The table shows the set of three stocks on my buy list and the one stock that was sold because it has dropped off the buy list.

Since my April 23, 2007 post, Cognizant Technology (CTSH) and C. B. Richard Ellis (CBG) have dropped off my buy list. While I had not purchased CTSH yet, I sold CBG on 5/7/07 and 5/8/07 at $37.47 and $37.31, for a small gain of about 3%. I continue to hold AVT, which closed at 43.07 on May 11, 2006. At this time, I still have not purchased Coach (COH) or Albemarle (ALB), which is fortunate since COH is down about $5 and ALB is down about $2 during this period.

For now, I do not plan to make any additional purchases since the indicators in my system show the market may correct soon.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

Monday, May 14, 2007

As part of the Investors Blog Network (IBN) Festival #4, a portfolio was submitted to the CNBC.com Million Dollar Portfolio Challenge. Here is the final result for the IBN Network Portfolio at the market close on Friday, May 11, 2007:

The portfolio took a big hit with Bruker BioSciences (BRKR) dropping from $11.56 to $8.20 two weeks ago, apparently due to disappointing earnings, which only slightly increased from last year. BRKR recovered to $9.02 in the final week.

Although the IBN portfolio did not finish in the top ten, it was educational and fun to participate in the contest. For reference, the top finisher had $4,886, 000 (389% gain!)and the tenth finisher had $3,503,000.

For more on Strategies and Plans, check back every Monday for a new segment.

Here is the latest status for the portfolio I entered in the CNBC.com Million Dollar Portfolio Challenge. Overall, my long term picks have done surprisingly well in this short term contest.

I entered a portfolio based on the modified Unemotional Investor portfolio which I described in My Stock Picks for Q1 2007. (Disclosure: I closed out this portfolio on March 2, 2007 as described in Q1 Stock Purchases Update - Closed All Positions and I repurchased Avnet (AVT) and C. B. Richard Ellis (CBG) on April 20, 2007. I sold CBG again on May 8, 2007.) In addition, I purchased Google (GOOG) and Golden Star Resources (GSS) which are stocks I like but were not identified by the system. Here is the portfolio status as of the market close on Friday, May 11, 2007.

Sunday, May 13, 2007

When we took an assignment overseas, my wife quit her job and became a stay-at-home spouse. We then returned and had our first child. My wife decided to be a stay-at-home mom.

MSN.com published this provocative article Stay-at-home mom’s work worth $138,095. After spending four days of being an at home parent, while my wife was out of town, I am able to confirm that my daughter's stay-at-home mom is worth every cent, and deserves a raise.

The 10 jobs listed as comprising a mother’s work were housekeeper, cook, day care center teacher, laundry machine operator, van driver, facilities manager, janitor, computer operator, chief executive officer and psychologist. I must admit I only did seven of the jobs during the four days. I shirked my role as housekeeper, cook (we ate pre-prepared foods), and laundry operator.

Truthfully, I do think the article understates the value of a stay-at-home mom. Several jobs, such as nurse, entertainer, project manager, and judge weren't include. Also, another very important job is parenting, which is to develop a productive and contributing adult for the future. The reality is my wife's role as a stay-at-home mom is priceless.

Happy Mother's Day

For more on New Beginnings, check back every Sunday for another segment.

Saturday, May 12, 2007

Business Opportunities Weblog notes that My Wealth Builder, which you are currently reading, is worth $350,579.34. In addition, several other blogs which I read are highly valued using this price calculator. Here are a few examples.

Is another bubble happening? My answer is no for the following reasons:

No one is buying. While Money, Matter and More Musings had been in discussions with Warren Buffett, none of us has been so fortunate yet:-) I have yet to receive any offers to buy my blog, much less one at an offer near the above prices. Perhaps, I should issue a 20% of discount coupon valid on Mother's Day.

Revenue or profits are being used to determine prices. The above calculations are based on the number of links and uses the same link to dollar ratio as the AOL - Weblogs deal. I expect that a more realistic price for my blog would be 10 to 20 times revenue. I can confirm that my blog is not making $17,000 to $35,000 per year to justify a $350,000 sales price.

It's easy to start a blog. The cost of entry is low. Why buy one when creating one costs far less and is easy to do? Technorati highlights that there are over 71 million blogs, up from 55 million 9 months ago.

Net, I don't see a bubble in the making yet. Also, the estimated value of My Wealth Builder and $3.10 will get me a Latte Grande at Starbucks. But then again, blogs may someday have the cache of a You Tube or My Space and we will all get rich :-)
For more on Reflections and Musings , check back every Saturday for a new segment.

My Festival pick is Save Money While Still Dining Out at Saving for Wealth, whichshares money saving gift certificates to reduce the cost of business dinners. OK, this one is a bit of a stretch for the theme:-)

I hope you enjoy reading these Carnivals and finding ideas you can use.

This marks the final edition of Carnival Highlights for the Week. Based on a discussions at Money, Matter, and More Musings on what readers do not like in Personal Finance blogs, I am discontinuing this segment for now. It seems many regular personal finance blog readers dislike round up articles because the readers have already seen many of the highlighted articles. My site analytics also show these articles have relatively low readership.

My apologies to those readers who have enjoyed this segment. I hope you will equally enjoy the new segments that will replace Carnival Highlights for the Week.

Friday, May 11, 2007

According to Status on America's Retirement at Bankrate.com, Americans are overconfident (49% who haven't saved a penny expect a comfortable retirement) and under saved (49% of all workers have saved less than $25,000). This is in contrast to the reality that companies are changing from a defined benefit (e.g. pension) to defined contribution retirement plans. In 1985, 91% of major companies provided a pension. In 2005, the number had declined to 61%. One can only expect the defined contribution plan percentages to increase.

This means that retirement saving is becoming more self service, with the bulk of the responsibility on the employee. Here's my personal self service plan:

Save at least 12% of my income. We currently save about 20% of my gross salary. This helps us in two ways. First, we are nominally grown our net worth by the equivalent of one year's take home pay every four years. Second, we are routinely living below our means. Both factors contribute to our ability to retire more comfortably.

For reference, I did not always save 20% of my salary. In my very first month of employment, I ran of of money 3 days before the following month's paycheck. However, as I received raises, I always made a point reserving part of savings and part of increased lifestyle. Over time the part of saving has become 20% of my salary.

Target for a minimum savings ratio of 12. Currently, our savings to income ratio is 15.1. Since I am conservative, our target savings ratio is 20. Also, I am not planning on social security payments to be available when I retire.

My company does not match 401K contributions. However, I still contribute the maximum that I am allowed.
For more on Reaping the Rewards, check back every Friday for a new segment.
Photo Credit: morgueFile.com,Michael Connors

Thursday, May 10, 2007

Last month, I had all day child care responsibilities while my wife was on vacation with her college friends for a four day weekend. This was a great opportunity to bond with my 2-1/2 year old daughter. I also imagined I would share some wisdom about life and personal finances :-) Here were the interesting insights I got about teaching and sharing experiences.

Don't be too serious when imparting wisdom. Although way too early, I decided to explain to our daughter that the world was going to be much different than for me. It was going to have much more change and be much more challenging. After giving me a serious look, my daughter said, "Are you OK, Daddy?" I immediately started laughing since I realized I was being way too serious.

This was similar to a previous experience I had while visiting a day care center many years ago. I asked the teacher if I could give the 2-3 year olds some words of wisdom. I gathered them together and said "I want to tell you something very important. These are the best years of your life. Enjoy them." They all looked at me with a face that said, "Huh?" The teacher smiled and said "He's right, enjoy these years." Again, I was being too serious.

Lesson #1: Lectures are not fun.

Use fun to teach. Everyday I would ask my daughter to pick up her toys, but to no avail. Then one time, I decided to make it a game. I picked up one bead and cheered, "Yea, we've got a blue one," and put it in the jar. Quickly, my daughter joined the fun. We counted each bead and clapped each time we put one in the jar. Before long, all the beads were put away and we were both cheering.

Lesson #2: Fun helps get results.

Have them participate in what I do. After a couple days of going to the zoo, getting balloons, swinging and sliding at the park, doing puzzles and releasing helium balloons, I wanted to do one of my own fun things. I asked my daughter if she would let Daddy play pool and she agreed.

While she couldn't play, I involved her in the game. I put her on a chair so that she could see the balls on the table. I asked her which ball she wanted me to shoot. I described the ball by color, solid or stripe and by number. I showed her the ball and she repeated the numbers. I encouraged her to clap and cheer when I sank my shot. Pretty soon she also told me that I missed a shot. It was a ton of fun for both her and me. And I got to play a modified pool and practice very tough shots.

Lesson #3: Participation creates fun.

Overall, it was a great time. My daughter survived four days with Daddy and we had exceptional fun. In addition, I learned that there is more to teaching than just sharing wisdom.

For more on Crossing Generations , check back every Thursday for a new segment.

Wednesday, May 09, 2007

I notice many personal finance bloggers focus on Net Worth. The definition of net worth is assets minus liabilities. A simple definition of an asset is any thing that you own. A liability is any debt that you have. For me, a more important number for retirement calculations is what I call Spendable Net Worth. I define that as spendable assets (e.g. stocks, bonds, and cash) minus liabilities.

I do not use my entire net worth to estimate retirement readiness. This reason is because some parts of net worth, such as a house and personal belongings, can't easily be used to fund a retirement. To illustrate, consider the following two hypothetical people and whether they could retire immediately.

Ima Saver decided to rent her home and live a modest life. Her biggest asset is her savings. Lot O'Stuff decided to spend most of his income on tangible assets - a nice home, a vacation home, nice cars and nice furnishings. Both have the same net worth of $1,050,000.

Value

Category

Ima Saver

Lot O'Stuff

House

0

$1,000,000

Mortgage

0

$500,000

Personal Property

$50,000

$500,000

Savings

$1,000,000

$50,000

Net Worth

$1,050,000

$1,050,000

Spendable Net Worth

$1,000,000

$50,000

Suppose both get an offer to retire in the next year. While both have the same net worth, spendable net worth is the best indication of ability to retire. Ima is in a position to consider the offer. For Lot, his options are to continue working or to sell off his assets to fund retirement, which is not likely.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Tuesday, May 08, 2007

Occasionally, I read commercially published articles which provide advice very different to what I have found successful in my own experience. I will be highlighting these articles periodically in a "I Won't Follow This Advice" segment. These segments represent my opinion and one should consult a professional before making any decisions. Here's segment #2.

Mr. Blodget's rationalization makes some sense until he points out that savers should get the same tax breaks as real estate 1031 exchanges that defer tax gains until a future date. Whoa! If real estate is such a good savings deal, why don't tax payers intuitively know this fact and be heavily saving in real estate. In addition, Mr. Blodget conveniently doesn't mention that tax advantaged saving vehicles already exist, IRAs and 401Ks.

While I agree that the government should have more incentives for savings, I am not holding my breath. Personally, I will continue to save 20% of my income and look for favorable tax treatments for my savings. In the long run, my retirement will benefit, even if the tax code is still unfavorable.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

One outcome of the real estate bubble is that property value assessments and the resulting property taxes have been rising. However, with prices cooling and sometimes regressing, the assessed value of the property may actually be higher than what one could get from selling the house. In such cases, the homeowner may be able to get the property value assessment lowered.

Contest assessments during the open challenge period. My county has a short period after assessments where homeowners may easily submit requests for revisions. After the open challenge period, homeowners need to go through the longer formal process to contest the assessment.

Make sure assessment data is correct. Appraisals sometimes are based on guidelines such as neighborhood, square footage, number of bedrooms and additions. Correcting errors which show better or higher than actual values can reduce one's assessment.

Get quantitative data to support one's case. Have comparable sales data or a paid appraisal from a reputable appraiser to support your case of a lower market value. Data from the same size houses with similar features in the same or similar neighborhoods are most useful.

I did all of these steps during our county's latest reappraisal of home values. Unfortunately, we had recently purchased our house and the purchase price since the previous assessment superseded any data I presented. Fortunately, we live in an area which did not experience a housing bubble and our home has appreciated about 15% from what we paid, according to Zillow.com.

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Monday, May 07, 2007

As part of the Investors Blog Network (IBN) Festival #4, a portfolio was submitted to the CNBC.com Million Dollar Portfolio Challenge. Here is the status of the IBN Network Portfolio at the market close on Friday, May 3, 2007:

The portfolio took a big hit with Bruker BioSciences (BRKR) dropping from $11.56 to $8.20 in the past week, apparently due to disappointing earnings, which only slightly increased from last year. Versus last week's results, this drop resulted in a 5% reduction in the portfolio gain and a 7% drop in ranking, showing the higher risk associated with concentrated portfolio.

For more on Strategies and Plans, check back every Monday for a new segment.

Here is the latest status for the portfolio I entered in the CNBC.com Million Dollar Portfolio Challenge. Overall, my long term picks have done surprisingly well in this short term contest.

I entered a portfolio based on the modified Unemotional Investor portfolio which I described in My Stock Picks for Q1 2007. (Disclosure: I closed out this portfolio on March 2, 2007 as described in Q1 Stock Purchases Update - Closed All Positions and I repurchased Avnet (AVT) and C. B. Richard Ellis (CBG) on April 20, 2007.) In addition, I purchased Google (GOOG) and Golden Star Resources (GSS) which are stocks I like but were not identified by the system. Here is the portfolio status as of the market close on Friday, May 4, 2007.

Again, I wish I was doing this well in my actual total investment portfolio, which has returned about 5% during this time. :-) The contest provides a "test" of the real world stock picks I have made, which makes me feel pretty good about the Unemotional Investor stock picking system.

Since there are only one week left in the contest, it does not look like this portfolio will be in the top 10 finishers at the contest completion.

For more on Strategies and Plans , check back every Monday for a new segment.

Photo Credit: CNBC.com

This is not financial or investing advice. Please consult a professional advisor.

Sunday, May 06, 2007

Here's a recent conversation at a meeting during work.
Comment: My husband asked me if everyone works 14 hours per day at our company.

Response: Only if they are slackers.
Everyone laughs.

In the old days, work and personal life were mostly separated. One could have a professional life and a personal life. Today, the term work-life balance is an oxymoron, a non sequitur, and a misnomer. Today, the overlap is tremendous. With e-mail, blackberries, laptops and globalization, there is no longer separation and much less balance. Vacations are often working vacations and about a third of workers do not take all their time off. A recent article, 'Getting Away From It All' Going Out of Style?, discusses this exact phenomena.

In addition, we've stretch both sides of the clock and week to get an edge. It used to be career books recommended coming in 45 minutes early to have an advantage at work. If only it were that easy:-) For me, the norm had become arrive 2 hours early, work through lunch, stay 2 hours late, do global conference calls from home, check e-mail at night to get a jump on international correspondence, and work about 8 hours on the weekend. At the same time, we have been downsizing and taking on more work.

With the addition of our daughter, I have decided that I needed a different work-life balance. However, I have learned there really isn't a balance. Balance implies that I can have both at the level and quality to I want. There is no longer balance, just choices, about how I spend the 168 hours per week that I have.

Choice means trade offs. More time at the at the office, means less quality time with family. More quality time with family, means less time at work. If someone has figured out how to have more quality time with the family AND more time at work, I will be all ears:-)

For more on New Beginnings, check back every Sunday for a new segment.

My Carnival pick is by Ardini which looks at 3 Steps Towards Solid Financial Freedom Planning. A great concise post summarizing the three steps: Setting Goals, Behavior Change and Regular Communication. This approach resonates with me and also can be applied to other areas of life. If you only have time to read one post in this Carnival, I recommend this one.

My Festival choice is Don't Be Afraid to Ask for a Discount, The Sequel by Five Cent Nickel. This post reinforces the concept of if one wants a lower price, one should ask. As a colleague once told me, the worst thing the salesperson can do is say "no." This is another concept that can be applied to other parts of life - e.g. asking for a raise.

My Carnival pick is by Inklings which gives us a run down on the pros to owning a family run business with Family Business: Pros to Embrace. The pros include: Time Together, Experience, Overcoming Hardship and Personal Development. The points are also valuable to other parts of life. The author noted that an upcoming post will discuss the cons of a family run business. Since I am now intrigued by the pros, I plan to check back on the post on the cons.

I hope you enjoy reading these Carnivals and finding ideas you can use.

Friday, May 04, 2007

Yahoo! Finance had an excellent article by Bankrate.com titled Life Stages Interactive , which shares retirement planning and considerations for different age groups. I like this article, because retirement planning and saving does different by age group and also depends how much has been done at earlier ages.

The age groups covered are: 20-40, 40-55, 55-65, and 65+. Here are some of the key points.

Early Career: 20-40

Start saving young and let compounding work.

Use tax advantaged (401Ks and IRAs) and taxable saving options.

Diversify investments

Mid Career: 40-55

Evaluate one's life, career and saving situation. Make adjustments

Eliminating debt is a priority.

Hire a financial planner.

Save for retirement over college if a choice needs to be made.

Late Career: 55-65

Decide when to retire.

Estimate retirement income and possible sources

Review health care coverage and insurance needs.

Post Career: 65+

Manage income sources and investments.

Whatever one's age, the article, Life Stages Interactive, will have a few good tips to consider. Also, if one plans to retire earlier than 65, simply shift the age range earlier by an appropriate amount.

For more on Reaping the Rewards, check back every Friday for a new segment.

Thursday, May 03, 2007

"Music Together, Music for Aardvarks, Gymboree. These three companies all offer a complimentary peek at exactly what baby music classes entail (hint: plenty of drumbeating, rattle shaking, and scarf throwing). It’s a great way to introduce your little one to the experience before shelling out $135 to $255 for a full term (generally 10 to 12 weeks).

What’s the Catch? Many parents have been taking classes together for a while, so they can be quite chummy. As an observer, you might feel left out and too shy to participate fully.

About Me

My wealth goal is to create a guaranteed yearly income stream equal to my highest salary for my retirement years. While I have developed a strategy to do this,
I am interested how others are thinking of achieving financial security for retirement.
This blog is a summary of facts, ideas, discussions, and action plans to achieve that goal.

Disclaimer

This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.

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Disclaimer:
This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results
based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.